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Analysis: SCO energy ties

Russian Federation, Chebarkul : Chinese armoured personnel carriers take part in war games in Chebarkul, 17 August 2007. The activities are part of the Peace Mission 2007 counter-terrorism exercise of Shanghai Cooperation Organization. The presidents of Russia, China and four other Central Asian states attended unprecedented joint military exercises intended as a display of strength before the Western world. AFP Photo / Maxim Marmur
by John C.K. Daly
Washington (UPI) Aug 22, 2007
For the past several days, Western analysts have been fixated on the Shanghai Cooperation Organization's massive Peace Mission 2007 anti-terrorist drill. The exercise, held Aug. 8-17, was the SCO's largest joint exercise in its six-year history, with armed forces from China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan totaling 6,500 troops, and 80 aircraft taking part.

The forces maneuvered at the Russian army's 34th Motorized Rifle Division base near Chelyabinsk in Russia's Volga-Urals Military District before shifting to Urumqi, capital of China's Xinjiang Uighur Autonomous Region. For the first time, China deployed its military forces in a combined mission abroad.

On Aug. 16, Russian President Vladimir Putin, Chinese President Hu Jintao, Kazakh President Nursultan Nazarbayev, Kyrgyz President Kurmanbek Bakiyev, Tajik President Emomali Rakhmon and Uzbek President Islam Karimov assembled in Bishkek and traveled the following day to Urumchi to observe the exercise's final deployment.

Kremlin propagandist proclaimed that the exercise represented the birth of an "anti-NATO" alliance and a "Warsaw Pact 2."

For his part, Putin was effusive about the organization and implicitly hailed its anti-U.S. stance, stating on Aug. 19, "Year after year, the SCO becomes a more significant factor in strengthening security and stability in the central Asian region. We are convinced that any attempts to resolve global and regional problems alone are useless."

Overlooked in all the military publicity, however, is the real issue, the growing economic integration of the SCO members, highlighted by a Kazakh-Chinese agreement that for the first time will allow Beijing directly to tap the hydrocarbon resources of the Caspian.

The idea of building a direct pipeline route from Kazakhstan's Atasu to western China's Alashankou was first broached in 1997. The initial $700 million, 688-mile project became operational last year with an initial throughput of 10 million tons per annum.

On Aug. 19, during a state visit to Astana after the SCO summit in Almaty, members of Chinese President Hu Jintao's entourage representing the China National Petroleum Corp. signed an agreement with Kazakhstan's state-run oil company KazMunaiGaz to initiate the second phase of the Atasu-Alashankou oil pipeline, extending it 435 miles westward to link it to the Caspian. The 745-mile pipeline extension will connect China with Kazakhstan's Kenkiyak and Kumkol oil fields.

The pipeline represents a further Chinese inroad into Kazakhstan for CNPC, which bought PetroKazakhstan in August 2005 for $4.18 billion. Lest anyone be in doubt, Nazarbayev said, "The Caspian will be linked to western China. These are major projects and today we reached agreement on these issues."

Nor was the pipeline extension the only bad news for hopeful Western investors. Hu and Nazarbayev announced that a 30 billion cubic meters per year natural gas pipeline, scheduled for completion in 2009, carrying Turkmen gas to China under a July agreement reached between Hu and Turkmen President Gurbanguly Berdymukhamedov, will transit Kazakhstan.

As leader of Central Asia's leading petro-state, Nazarbayev is thinking big. In his quest to diversify Kazakhstan's export markets, Nazarbayev said in Bishkek, "The draft Asian energy strategy envisions the establishment of an SCO energy agency, which would be a type of 'brain center' and database, while transactions on the market for energy resources could be made through an SCO energy bourse."

Putin endorsed Nazarbayev's calls, stating, "I am sure that the initiated energy dialogue and accompanying national energy strategies as well as the establishment of an energy club will set the priorities for our further cooperation."

Iran's Mahmoud Ahmadinejad, present as an SCO invited observer, reiterated his proposal to hold a meeting of SCO energy ministers, remarking, "I suggested last year that a meeting should be held between oil and gas ministers of SCO member states to optimize cooperation in transportation, prospecting, development and refining. As before, Iran is ready to organize such a meeting."

The West is not as yet completely locked out of the transportation market for Kazakh hydrocarbons, however. Prior to the SCO exercises Azerbaijan's President Ilham Aliyev visited Astana on Aug. 7-8 and said, "Kazakhstan and Azerbaijan are working together on strategic issues in energy and transport. Azerbaijan's border is always open for the transportation of energy resources to Europe."

During the visit, representatives of the State Oil Co. of Azerbaijan and their counterparts in Kazakhstan's national oil and gas company KazMunaiGaz signed an agreement on strategic cooperation in the oil and gas sectors and a memorandum on the joint implementation of a trans-Caspian project to ship Kazak oil through the Baku-Tbilisi-Ceyhan pipeline at an initial rate of 500,000 bpd, with a future capacity of 750,000 bpd.

Kazakhstan's energy export policy is to make its hydrocarbons available to everyone, finding diversity a guarantor of its independence. During an interview with the BBC, Nazarbayev said, "The United States, Russia and China are all interested in Kazakhstan, and we don't want to allow a conflict of interest here."

It is obvious, however, that geography and proximity have given Russia and China advantages that Washington lacks. In addition, both Beijing and Moscow have studiously avoided the pontificating on human rights and electoral transparency that the Bush administration frequently directs toward Central Asian states.

While the initial winner for Kazakh energy was Russia, with its 750,000 bpd Caspian Pipeline Consortium pipeline opening in 2001, China's recent agreements have made it a rising major player in the race for Kazakhstan's hydrocarbon assets.

While the West can comfort itself with Almaty's commitment to provide oil for BTC and Western investment in the massive Tengiz oil field, if it is to increase its share of Kazakh reserves, a policy of toning down rhetoric and increasing investment would seem to be most prudent.

Almaty has already indicated its unhappiness with a Western consortium developing Kazakhstan's Kashagan field and its estimated 9 billion to 16 billion barrels of reserves; if the West does not alter its policy, it is now evident that Beijing would be only too happy to take up the slack.

earlier related report
"Peace Mission 2007" to tackle terror threats
MOSCOW. (RIA Novosti military commentator Nikita Petrov)
The Russian Armed Forces have been rather active this summer. So far this year large-scale troop exercises have been held in the Leningrad and North Caucasus Military Districts, as well as in the Russian Far East and in the Northern Fleet. Strategic bombers flew simulated long-range combat missions; 2,500 Russian paratroopers performed group jumps alongside their German counterparts; and another exercise involving elements of the Russian Navy's Northern Fleet and the U.S. Navy spanned the North Atlantic.

Yet in all these operations, there has been one prominent absence: Defense Minister Anatoly Serdyukov did not attend any of these exercises, including those intended to assess the performance of the generals commanding the new eastern and western strategic sectors.

This is because Serdyukov is busy preparing for the centerpiece of this summer's military exercises. "Peace Mission 2007" will involve all six Shanghai Cooperation Organization (SCO) countries (Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan), 4000 troops, nearly 100 aircraft, and an unspecified number of logistical support units.

This follows a previous joint exercise, "Peace Mission 2005", which saw large-scale amphibious landings on China's Yellow Sea coast. That exercise caused some controversy, and was seen by some as preparation for a Chinese invasion of Taiwan.

In contrast, Russian commanders have described "Peace Mission 2007" as an anti-terrorist exercise, and have emphasized that it is not aimed at any third country.

As such, says Colonel General Vladimir Moltenskoy, Deputy Commander-in-Chief of the Russian Army, it will not involve any heavy military equipment. Instead border guards, elements of the Russian Interior Ministry's Security Force and special police units will take part.

Mechanized-infantry combat vehicles and armored personnel carriers, rather than tanks, will also take part in the exercise.

The dual location exercise, planned for August 9-17, will be held in Urumqi, the capital of China's Xinjiang-Uighur Autonomous Area, and at the range of the Russian Army's 34th Motorized Rifle Division near Chebarkul town, about 50 miles (80 km) west of Chelyabinsk, in Russia's Volga-Urals Military District.

While the bulk of the troops will be Russian and Chinese, Kazakhstan and Tajikistan will contribute one airborne company each. Kyrgyzstan and Uzbekistan will send an airborne platoon and staff officers, respectively.

The exercise will also involve 2,000 Russian and 1,700 Chinese soldiers, plus an unspecified number of Russian logistics-support units. The Russian Air Force will contribute six Ilyushin Il-76 Candid transport planes, nine Sukhoi Su-25 Frogfoot ground-attack jets, 14 Mil Mi-24 Hind helicopter gunships and 18 Mi-8 Hip helicopters.

China will provide six Il-76 aircraft, eight JH-7-A fighter-bombers, 16 JG-9-W and 16 Mi-17 Hip helicopters.

Moreover, each side will contribute 18 122-mm and 100-mm artillery systems.

The initial phase will be conducted in Urumqi and will involve the heads of SOC general staffs. Under the exercise scenario, they will receive information about a terrorist attack on a small town in the Urals 2,000 km away. The participants will then brief their respective national leaders on the situation, compile plans to contain the conflict and prepare for a military operation against terrorist units.

The generals will face the considerable logistical challenge of deploying 1700 Chinese troops and their equipment, by rail and air, from Xinjiang to central Russia.

It took SOC military experts six rounds of talks to coordinate all aspects of the upcoming war games. Nonetheless, not all problems have been ironed out.

Kazakhstan, though a member of the SCO and a participant in the exercise, has failed to pass legislation allowing foreign troops to cross its territory. The most direct route from Xinjiang to Chelyabinsk in central Russia would be through Kazakhstan.

Russian troops have been training near Chebarkul since early June; and the first Chinese trains are scheduled to arrive on July 27.

On August 16, the leaders of the SOC countries - Russian President Vladimir Putin, Chinese President Hu Jintao, Kazakh President Nursultan Nazarbayev, Kyrgyz President Kurmanbek Bakiyev, Tajik President Emomali Rakhmonov and Uzbek President Islam Karimov - will meet in Bishkek, the capital of Kyrgyzstan.

The next day, they will watch the final phase of "Peace Mission 2007."

The leaders of the four SCO observer countries, i.e. Iran, Pakistan, India and Mongolia, will not be invited to the exercise. However, they will be represented by their respective military attaches accredited in Moscow. 400 accredited foreign journalists will represent the wider international community.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Source: RIA Novosti

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